Coinbase, Valued at $100B, is Latest to Announce BTC on Balance Sheet
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Coinbase, Valued at $100B, is Latest to Announce BTC on Balance Sheet

Coinbase recently announced that they've held Bitcoin—and other assets—as far back as 2012.
Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

One of the most trusted digital asset exchanges in the world, Coinbase, in a blog post yesterday, announced that it holds BTC as an asset on its balance sheet. Crypto-industry experts are considering this declaration as a significant endorsement for the worthiness of Bitcoin as an asset and the overall crypto-economy—as additional companies may follow suit.

Coinbase Holds BTC on Balance Sheet: Why it Matters

With its complex technology, regulatory licenses, and highly loyal customer base, Coinbase has an estimated market value of $100 billion. Industry experts, familiar with Coinbase’s finance, believe that its net profit margin is more than 20%. It is, therefore, a development of consequence for such a highly valued and profitable company to realize the potential of Bitcoin. 

It shouldn’t come as any surprise that Coinbase holds Bitcoin on its balance sheet. A number of other companies have recently made such moves. What could be surprising however, is that Coinbase has been holding BTC on its balance sheet since 2012.

It is also evident that Coinbase has no plans to liquidate its BTC holdings soon. In no uncertain terms, Coinbase says it plans to continue holding crypto:

“Since our founding in 2012, Coinbase has held bitcoin and other crypto assets on our balance sheet — and we plan to maintain an investment in crypto assets as we believe strongly in the long-term potential of the cryptoeconomy.”

It has also left no space for speculation on what could be the possible factors driving the company’s interest in Bitcoin or the crypto economy per se. Coinbase says that its investments in the crypto economy have required it to “develop new investment, accounting, and tax policies.”

The experience that the company has gained in the process would help it to develop a compliant digital currency exchange “linked to the traditional financial system, a critical piece of infrastructure to help (the) digital currency grow”.

While elaborating on the philosophy that drives such investments in the crypto-economy, Coinbase believes the investment is part of “building a diverse balance sheet that is adequately hedged from the traditional capital markets and monetary debasement.” This argument only furthers the notion of seeing BTC as a treasury reserve asset that many crypto industry experts have already advocated for rather than only seeing it as akin to a ‘high-growth tech stock’. 

Coinbase Inspiring Other Tech Giants

Coinbase holding Bitcoin as a long-term asset on its balance sheet inspires other companies to see the value in the digital asset. Although there has been no official confirmation on the specificities of the deal, sources familiar with the deal say that Tesla’s $1.5 Billion Bitcoin investment was executed by Coinbase. 

Much along the same line of what Coinbase said about its Bitcoin investment, Tesla had earlier stated that its Bitcoin investments were to “diversify and maximize returns” on part of its cash reserve lying in excess of the minimum operating liquidity requirements.

As was the case with Tesla, Coinbase was selected as the primary execution partner for MicroStrategy’s $425 million purchase of Bitcoin. According to the official statement released by the Coinbase team, Coinbase helping Microstrategy was part of its strategic offering to help companies “diversify their capital allocation strategies with crypto”. 

Whether this trend to use BTC investments as a hedge against traditional monetary finance risks, such as inflation, continues to grow, we’ll have to wait and see. The trend is certainly becoming more and more common.

Do you think that Bitcoin’s use as a hedge against traditional monetary finance risks, such as inflation, will outweigh its high volatility risks in the eyes of the corporate world? Let us know below in the comments.